Published February
2002
Economists:
Recession to end by second half of year
By
John Wolcott
Herald Business Journal Editor
SEATTLE — A panel
of economists found common ground here during January’s economic forecast
forum, agreeing that the region should start to climb out of the recession
later this year despite the impact of massive Boeing layoffs.
But total recovery
will take quite a while, they added.
Signs of the national
rebound should be seen by midyear, though certain business sectors will
see a slower resurgence, they said in their presentations at the Seattle
and King County Economic Council’s annual economic forecast gathering
at the Westin Hotel.
Acknowledging the
difficulty of forecasting economic trends in an environment still vulnerable
to terrorism, uncertain aerospace markets and global wars, the economists
made cautious predictions to the several hundred business people in attendance.
Wells Fargo Bank’s
Executive Vice President and chief economist, Sung Won Sohn, said he expects
a return to modest economic growth nationally during the next few months,
spurred by government aid and monetary policies.
By summer, the country
should respond to interest cuts, tax reductions and increased fiscal spending,
returning the national economy to robust growth, he added.
“This will turn out
to be one of the mildest economic recessions we’ve seen, with growth benefiting
from the restructuring of companies,” he said.
John Mitchell, Western
Region Economist for U.S. Bancorp, predicted an end of the Northwest and
central Puget Sound recession by the second half of the year, noting that
glimmers of the hoped-for rebound are starting to emerge.
Economist Dick Conway,
co-publisher of the Puget Sound Economic Forecaster, said the impact of
the Sept. 11 terrorist attacks added uncertainty that made forecasting
even more daunting than usual, but said there are already signs that the
economy is recovering.
“The Puget Sound
region, despite its reputation for volatility, has suffered only two recessions
in the past 30 years (the 1970-71 Boeing bust and the 1981-82 recession),
both marked by a concurrent national recession and a large number of Boeing
layoffs,” he said.
His regional forecast
calls for the recession to be over by July. However, he believes the rebounding
economy will not see total employment recover to the peak it reached in
the first quarter of 2001 until early 2004, which will mean stagnant employment
regionally for another two years.
Keynote speaker Peter
Navarro, an associate professor of economics at the University of California
at Irvine and author of “If It’s Raining in Brazil, Buy Starbucks,” agreed
recovery is on the way but cautioned that the new economy will be different
from the pre-Sept. 11 economy.
“How will the worst
terrorist attack in United States history ultimately affect Seattle? First,
in the extended war on terrorism, government will dramatically shift from
‘butter’ — such as education, infrastructure and health care — to ‘guns,’
including missiles, planes and homeland security,” he said.
Also, businesses
will divert productive capital from new plants and equipment to more security
guards, fences and protective technology, a “terrorist tax” that will
deal a sharp blow to productivity and growth, he predicted.
And consumers will
change their buying and traveling habits, seeking recreation closer to
home, doing more Internet shopping and less air travel, he predicted.
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